In re Caldwell
| Decision Date | 10 November 1986 |
| Docket Number | Bankruptcy No. 3-85-01637. |
| Parties | In re Albert H. CALDWELL, Debtor. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Eastern District of Tennessee |
Wade M. Boswell, Knoxville, Tenn., for debtor.
Herbert S. Moncier, Knoxville, Tenn., for James E. Hardin, James C. Hardin and Ralph Majors.
An extensive evidentiary hearing was held to consider confirmation of the debtor's plan on September 11, 1986.
A somewhat detailed history of this case is necessary to fully understand the debtor's plan and the creditors' objection thereto.
In 1979 the creditors instituted a civil action in the Tennessee state court against the debtor and three other persons for false arrest, false imprisonment, and malicious prosecution. The creditors alleged they had been the victims of a criminal escapade participated in by the debtor's son during the Christmas holidays in 1978; that the debtor, an Assistant Chief of Police with the City of Knoxville, took charge of the investigation, caused criminal warrants to be issued against them, and personally supervised their arrest. The criminal charges were later dismissed.
The resulting civil litigation against the debtor resulted in a jury verdict against the debtor and a co-defendant. The jury awarded creditors both compensatory and punitive damages. The judgment was entered on February 29, 1984.
Subsequently, the debtor appealed the civil judgment to the Tennessee Court of Appeals. The appellate court reduced the amount of punitive damages. The damage award against the debtor, as modified by the appellate court, is in the total amount of $40,000.00, representing $15,000.00 in compensatory and punitive damages awarded to James E. Hardin, $15,000.00 in compensatory and punitive damages awarded to James C. Hardin, and $10,000.00 compensatory and punitive damages awarded to Ralph Majors. In all other respects the jury verdict and judgment were affirmed in an opinion of the court of appeals entered on April 23, 1985. The debtor then applied for permission to appeal to the Tennessee Supreme Court; but on August 12, 1985, that court declined to grant permission.
On October 2, 1985, the debtor commenced a voluntary chapter 7 bankruptcy case. Only three unsecured creditors are listed in the debtor's schedules — the three judgment creditors who now object to confirmation of the debtor's plan. Two secured creditors are listed: the KPD Employees Federal Credit Union, $11,877.00; and Home Federal Savings and Loan, $1,578.00.
Thereafter, the creditors instituted an adversary proceeding (Adv.Proc. No. 3-85-1290) to determine the dischargeability of their judgment debt. Following a pretrial conference in the adversary proceeding, the creditors filed a motion for summary judgment. On April 17, 1986, this court entered a Memorandum and Judgment granting the creditors' motion for summary judgment, after finding that the civil judgment was nondischargeable pursuant to 11 U.S.C. § 523(a)(6).1 No appeal was taken from that judgment. Prior to the entry of the April 17, 1986 summary judgment this court, on February 5, 1986, granted the debtor a discharge pursuant to § 727. The discharge was, however, entered subject to the future outcome of the creditors' adversary proceeding.
On June 9, 1986, the attorney who represented the debtor in the filing of the chapter 7 case and in all matters arising thereunder, including the debtor's defense of the nondischargeability issues raised in the adversary proceeding, filed a motion to withdraw as attorney for the debtor. That motion was granted and notice of appearance was thereafter filed by Richard Stair, Jr., who represented the debtor subsequent to June 9, 1986, in those matters presently at issue in the debtor's converted case.2
On June 9, 1986, the debtor filed a "Motion of Debtor to Convert Case to a Case Under Chapter 13 and For Revocation of Chapter 7 Discharge." On June 13, 1986, an Order for Relief was entered under chapter 13.3 No ruling was made on that portion of the debtor's motion seeking to revoke the February 5, 1986, discharge granted under the provisions of § 727.
On June 19, 1986, the creditors filed a response opposing the debtor's conversion to a case under chapter 13 and request for revocation of the chapter 7 discharge. The creditors also moved for reconversion of the chapter 13 case to a case under chapter 7.
On June 20, 1986, the debtor filed an updated schedule of current income and expenses together with a chapter 13 plan. That plan proposed payment of $400.00 a month from his wages for thirty-six (36) months. The plan also provided that the debtor would pay his secured creditors outside the plan. The debtor proposed to fund the plan from his future earnings and with an additional sum of $6,300.00, in the possession of the chapter 7 trustee, collected from the liquidation of his IRA account. In his proposed plan the debtor listed a priority claim against the estate of $2,889.68, allegedly arising from the premature distribution of his IRA account.4
Subsequent to the September 11, 1986 hearing, the debtor filed a modified plan pursuant to § 1323 of the Bankruptcy Code whereby he proposes to pay to the trustee from his future earnings the sum of $550.00 each month for a period of 36 months.5 The debtor further proposes to turn over to the trustee all tax refunds attributable to the debtor's earnings after conversion of the case to chapter 13. In addition the debtor proposes to pay to the trustee the additional sum of $6,300.00 turned over to the chapter 7 trustee from the IRA account. The debtor proposes to pay the $132.00 monthly mortgage payment due Home Federal Savings and Loan on his jointly-owned marital residence outside the plan. He also proposes to pay outside the plan the sum of $150.00 per month to the KPD Federal Credit Union on two loans to his wife; these loans are partially secured by a jointly-owned 1985 Chevrolet automobile.
In summary, the only claims to be paid through the plan are the judgment debts in favor of Hardin, Hardin, and Majors, in the combined amount of $40,000.00 together with accrued interest through October 2, 1985, the date the debtor filed his voluntary petition under chapter 7; the priority claim of $2,627.18 to the Internal Revenue Service representing either the debtor's or the estate's anticipated liability attributable to the withdrawal of the IRA account; and expense of administration (trustee's compensation and expenses; attorney compensation).
As heretofore indicated, the debtor is an Assistant Chief of Police with the Knoxville Police Department having been employed by the City for more than twenty-six (26) years. His gross pay is $2,889.47 per month and his take-home pay is $2,177.92. He has no current source of income other than from his employment. The debtor is married and has no dependent children. He is 54 years old and testified that he has no intention to retire in the foreseeable future. His wife is not employed outside the home.
The assets the debtor owned or had an interest in at the time of the filing of his chapter 7 petition are itemized as follows:
Real Property
1. His survivorship interest in the marital residence at Route 2, Wooddale Road, Strawplains, Tennessee, owned as a tenant by the entirety with his wife. This property is encumbered by a mortgage in favor of Home Federal Savings & Loan with an unpaid balance of approximately $1,000.00. Testimony from the chapter 7 trustee was to the effect that an offer to purchase the debtor's survivorship interest had been solicited from the creditors and from the debtor with the trustee having received a written offer on behalf of the creditors through their attorney to purchase this survivorship interest for the sum of $500.00. As this is the only evidence of the value of the debtor's survivorship interest in this real estate, the court finds that the survivorship interest in fact has a value of $500.00.
2. A one-fourth (1/4) interest in a residence at 913 Ponder Road, Knoxville, Tennessee, which was purchased by the debtor's mother on May 18, 1978. In an amendment filed on June 9, 1986, and through his testimony at the hearing, the debtor asserts that this real estate is the exclusive property of his mother, because he was included as a grantee in the deed without his knowledge and his mother made the downpayment and has paid all monthly payments on the mortgage encumbering the property. Nonetheless, the debtor is the record owner of a one-fourth (1/4) interest. The debtor testified that in his opinion this real estate has a value of approximately $55,000.00 and that it is encumbered with a mortgage which had a pay off as of October 2, 1985, in the amount of approximately $12,900.00. The debtor further testified that in his opinion the value of his one-fourth (1/4) interest...
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